Caught in the middle: Generation X needs to focus on retirement, but isn't.

It can seem impossible to get ahead in the present, let alone to save for the future. 

A version of this article originally appeared on MarketWatch
November 2019

Sandwiched between millennials and baby boomers, Generation X doesn't really capture too many media headlines. 

But Gen Xers, currently aged 39 to 54, now occupy the aptly named "sandwich generation," facing the time in their lives when they may be providing financial support for their children (including adult children, in many cases) as well as aging parents. And given all the pressures that come with that, Generation X deserves some attention, too. 

On the border of Gen X and baby boomer myself, I can identify with the pressures of this life stage. With two daughters entering their 30s and two college-aged stepchildren, as well as parents who need extra help these days, I know firsthand the expenses that can pile up. 

Between tuition payments, eldercare expenses and out-of-the-blue costs like home repairs, it can seem impossible to get ahead in the present, let alone to save for the future. In fact, in a recent survey, 42% of Gen Xers revealed they are more focused on paying down debt right now than saving for retirement.

I know it's tough to be in that position, but I worry about Gen Xers shortchanging themselves. Your late 30s to 50s represent prime earning years. Not to mention, the runway to retirement is only getting shorter by the time you reach this age. If you're not saving now, it's going to be that much tougher to catch up in your 60s.

There are concrete steps that members of Generation X can take to address some of these financial burdens and the stress that comes with them while still making space for retirement savings. Much of this comes down to prioritizing, asking for help and getting a solid plan in place.

I'm a big believer of taking advantage of the resources that are available to you through your workplace. First and foremost, Gen Xers (and workers of all ages, for that matter), should aim to save at least enough in their 401(k) to take advantage of any matching dollars offered by their employer. Not doing so is like leaving money on the table. Not to mention, traditional 401(k)s are funded with pretax dollars, so they can help you manage your tax strategy now and in retirement.

While saving enough to get the full employer match is a great start, it's worth noting that many companies set their matches around 3% to 6%, and contributing only up to that amount likely won't get anyone to their long-term goals. That's especially true if you don't start saving until your 40s. The thing about investing for retirement is that, thanks to the power of compounding, the longer money is invested the more time it has for potential growth. If you start investing at a younger age, you'll likely be fine saving a lower percentage of your salary — say 10% to 15% — but if you wait, you'll need to be much more diligent.

If you can find the resources, it would make sense to max out your 401(k). The 2019 contribution limit is set at $19,000, but those aged 50 and above can sock away an additional $6,000 in catch-up contributions. Even if you can't save that much, try to increase your savings rate each year by at least 1% or 2%. Those small increases can add up over time. 

Once you have money in your 401(k), keep it there. It is crucial to think of a 401(k) as a long-term savings vehicle. The survey found that nearly a third of Gen Xers (31%) have borrowed from their retirement savings, and more than half them have taken more than one 401(k) loan. While there are a few situations when borrowing from your retirement account might make sense, there can be costly tax penalties and you could derail your savings plan, so it is important to consider all the financial implications before resorting to a 401(k) loan.

Outside of a 401(k), members of Generation X can look into other tax-advantaged retirement accounts, like health savings accounts (HSAs), which are also offered through some workplaces, and individual retirement accounts (IRAs), which are offered through financial institutions outside of work. If your company offers some form of equity compensation or stock purchase plan, you could consider putting that benefit toward retirement as well.

Those who struggle to put money aside each month can consider automating elements of their savings, such as by signing up for automatic contribution level increases if their 401(k) plan allows it. It's also smart to increase your contribution level when you get a raise or bonus, so you won't feel the impact of a smaller paycheck. 

After getting some basic retirement saving discipline in place, it's time to tackle debt. When the Gen Xers in the aforementioned survey were asked about their top sources of money-related stress, saving for retirement emerged as number one but credit card debt was second. High-interest debt is a tremendous drain — if you're giving money to creditors every month, it's hard to imagine where you'll find resources to direct to your 401(k). 

As basic first steps, aim to stop racking up new charges so you can focus on paying down the interest and the principal, make more than the monthly minimum payment on cards with the highest interest rates, and try negotiating with credit card companies for a lower interest rate that preserves your credit rating.

Keep in mind, finances are tricky, but you don't have to figure everything out on your own. It was encouraging for me to see that the Gen Xers in the survey recognize the need for professional financial help. Fortunately, most 401(k) plans today offer some kind of managed account or advice service, and there is plenty of help available through financial advisers and online. Consulting with a financial professional can help you look at all of your current and anticipated obligations and sources of income, and arrive at a plan to make your money work best for you.

While Generation X may feel overwhelmed by the financial pressures of raising children, financing their college education, and helping grown children as well as aging parents, they cannot lose sight of their own retirement goals. With the right financial plan in place, they can give due deference to their own financial future and the goal of a comfortable retirement. 

Catherine Golladay is president of Schwab Retirement Plan Services.